Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1887-05-05
Western Farm Loans
ny the hOVrfnOr.
OKAMANDAL SMITH. secretary Of State.

During the past year, there have been
formed in this STATE many companies for
the purpose of negotiating Western farm
mortgages aud considerable interest has
been created in these investments. For
many years these companies have been
operating in other States but not until re-
Gently has any great amount Of such bust
ness been transacted in the Eastern States
and particularly IN Maine. But Western
falul loans have taken Il decided boom
and the loan business has quickly as
sumed vast proportions. Millions of
dollars have been invested through these
companies and so iar. there have been
satisfactory returns; but there are some
new dcvclopcments in the business which
should be considered and they may be
deemed OF ~ullirent importance to warrant
greater caution on the part OF the IN
vestor1, in the future.
Wit, the increase of companies, there is
increase Of competition. This competition
is carried to the very door OF the tarn
house The farmers are visited by the
many agents of these companies and are
solicited to take loans upon their farms.
The agents picture the great advantages
to DO derived from the m rnev thus
borrowed and, IN the most plausible
manner, present the financial operation OF
the loans, Yet mere is where the most
dangerous part OF the competition comes
in; several agents will visit the same
farmer and will scvcrilly bid for his loan
aud 1t is frequently the case
that IN This way. the farmer
loans more than he can redeem.
Sometimes the loans ale 80 per cent OF
the value OF the farm ana it is reported
that the average per cent on the munich
pal valuation of farms is nearly seventy.
There 4. little or 10 accumulation of
capital bv the farmers and in case of the
failure OF the crops. the loauers will have
20 purchase the farm or pass the interest.
Reports from many localities show that n
large per cent OF the farms are mortg aged.
Concerning this point, the Chicago Inter
Ocean. reliable authority on the subject
says:
III case NJ general failure OF crops in
any of these over muttRaCvd |, CAlltits, many
holders wi! be required 10 sell treir farms ~
sacrifice. ss ut such time SO much land
will be thrown on the market as to make
sales impossible except at a great loss. In
stu tut ~ IliifBfs thor u \
quite heavy mortgage debt carried by our
farmers hut never TO ANY such extent is
nov the case in some OF the States bordering
on the Missouri river. In the days of the
early settlement of the central western States,
money WAS never as freely offered by capital
lists ss Is now the case in Kansas and Nebras-
ks, where the average rate of interest paid
by the borrower including second mortgage
notes, is from TO II per cent per snnum.
But what about the companies that are
negotiating these loans for investors. In
the Western States As well AS in the
of business that they may transact Most
of them have small capitals and yet they
are guaranteeing by the millions the prin-
cipal ard interest of the loans which they
negotiate. Some have already negotia:-
ed loans that in amount exceed their
capital three times itself. Sould the
farmers fail to meet their obligations to
any great extent. rs is liable in the cas- e
of a severe drought it is not impossible
tAaI hese companies would become very
much embarrassed. |! would seem in
consequence of such liability that these
companies should in turn be guaranteed or
limited in their transactions.
These investments have been pronounced
safe aud many men who have accumulat-
ed Il few thousands have put their savings
into this paper. During the discussion
last winter. when ii was proposed to allow
our savings banks to invest their deposits
in these securities, some OF our ablest imam
ciers opposed the scheme.
State Bank Examiner Richards
did all he could TO kill the
bill before the legislature, which provided
for such privilege. THESE gentlemen
must have had very good reasons for tax.
Ing the ground they did. The companies